Suddenly, the stock exchanges plan the Harris-Trade
Monthly investors are preparing for a return of Donald Trump to the White House. Now they must re-adjust: in the coming weeks, there could be a rollercoaster ride at the financial markets.
Who will be the US President in November: Donald Trump or Joe Biden? For months, investors have prepared for the scenario that Donald Trump returns to the White House. However, Biden's sudden exit has not only disrupted the political landscape in the US but also the financial markets.
With Vice President Kamala Harris' seemingly secure candidacy, the race is once again open. Many investors were caught off guard - and may need to adjust their investments. "The confidence that Trump would win was really strong," quotes financial agency "Bloomberg" investment strategist Gene Munster from Deepwater Asset Management. "The markets won't like this new uncertainty, just as they don't like the constant news about who's in, who's out, and all the other unknowns."
Since the attack on Trump, Biden's exit has been another shock to the markets, which were already reeling from his disastrous TV debate performance at the end of June. Investors had bet on a Trump victory. He had promised to roll back environmental regulations, financial regulations, and other bureaucratic measures, as well as a new round of his massive tax cut programs for the wealthy and corporations and higher protective tariffs. An army of investment strategists have been working on strategies that would benefit industries and investments most from the radical economic agenda of the Republican.
Will Harris put an end to the Trump Trade?
A Trump victory was generally seen as positive for the US stock market, particularly in two sectors: the oil industry and the financial sector, whose papers had been buying up strongly. Additionally, due to higher tariffs, a stronger US dollar was expected. Potential winners were seen in US electric car manufacturer Tesla and data firm Palantir, whose CEOs Elon Musk and Peter Thiel are now the biggest Trump allies in the US business world - and could soon become major influencers for the President.
However, all these considerations are now irrelevant with Biden's departure. Since Sunday, the gains of Trump traders have been eaten away: the Bitcoin price has fallen, the returns on US government bonds have dropped, and the futures of US stock markets have risen.
The game is not over yet
In essence, the potential winners in a Harris presidency would likely be the same companies that would have lost out under a Trump presidency. These would primarily be providers of renewable energy such as NextEra or First Solar. And losers would likely be large oil companies. State bonds are also expected to perform better under a President Harris than under a President Trump, according to experts, due to the belief that under the Republican there would be significantly higher inflation.
It's clear: markets hate uncertainty. The longer it looks like a head-to-head race instead of a clear victory for Trump or Harris, the longer there could be ups and downs. The chief equity strategist of Citigroup now estimates the chances of the election outcome through Biden's exit to be closer to 50/50.
It's unclear if Harris will make it through among the Democrats, so the markets may remain nervous - most likely until the Democrats' convention in August. "The Trump trade is likely to take a break until it's clearer who the Democratic candidate will be," says Chief Strategist Yung-Yu Ma at BMO Wealth Management to "Bloomberg." "This leads to even more political uncertainty in the markets, so there could be some short-term volatility as a result."
The news of Kamala Harris' potential presidency has led to a reevaluation of investment strategies by many, as they had previously bet on a Donald Trump victory. The financial markets are uncertain about the impact of a Harris presidency on stock prices, particularly in sectors like renewable energy and oil.
